Cheaper food items helped retail inflation drop to a fresh low of 4.38% in November -- the fifth consecutive month of decline -- a development that can strengthen the case for interest rate cut by the RBI.
This is the lowest level of Consumer Price Index (CPI) based inflation since the government started computing the new series of data in January 2012. It stood at 5.52% in October 2014, while same was over double the current level at 11.16% in November 2013. The food inflation also came down to 3.14% in November as against 5.59% in the previous month.
Retail prices of vegetables declined by 10.9% as against a decline of 1.45% in October, according to the data released by the Ministry of Statistics and Programme Implementation today. Price rise in fruits slowed to 13.74% from 17.49% in October. However, the rate of inflation in protein-rich items like eggs, fish and meat was at 6.48% in November, slightly higher from 6.34% in the previous month.
The Reserve Bank in the recent past has focussed on retail inflation while deciding its monetary policy, but there have been no rate cut for many months. RBI has been targeting a retail inflation of 8% by March 2015 and 6% by January 2016. In its monetary policy review earlier this month, the Reserve Bank kept its key repo rate unchanged at 8% and cash reserve ratio (CRR) at 4%. "...if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle," RBI Governor Raghuram Rajan had said.
"Inflation has come down because of the seasonal fall in vegetable and fruit prices. And it has also been helped by fall in global commodity prices... However, RBI will not cut the policy rates before the Union Budget (2015-16)," said Rupa Rege-Nitsure, Chief Economist, Bank of Baroda. Among other items, prices of cereals and its products came down to 5.2% from 6% in the previous month. For pulses and products, inflation stood at 7.54%, marginally higher from 7.51% in the previous month.
In the fuel and lights category, inflation softened to 3.27% during the month. For milk and milk products, the rate of price rise stood at 10.24% against 10.79% a month ago. The rate of price rise in non-alcoholic beverages was 5.75% in November from 5.64% in previous month. Inflation in food and beverages stood at 3.5% over 5.68% in the previous month.
Sugar prices fell by 0.28% during the month compared to 0.37% rise in October. The data further showed that consumer inflation came down to 4.69% in urban India and 4.09% in rural parts during November. In the previous month, the respective figures stood at 5.63% and 5.52%.
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